How an Illness or Injury Can Lead to Bankruptcy

Many people associate filing for bankruptcy with irresponsible financial decisions, though this is rarely the story behind a consumer bankruptcy. People get into overwhelming debt for a variety of reasons, many of which are beyond their control. The sudden loss of a job, having a child with special needs, predatory lending practices, fraud, and other circumstances can all lead to the need for bankruptcy relief. One of the most common reasons that consumers in the United States file for bankruptcy is medical debt.

The Costs of Healthcare

Everyone is likely aware that medical care is expensive. However, the speed at which medical bills pile up can be astounding to those suffering from an illness or injury. For example, if you are in a vehicle crash and you experience head trauma, it could result in a severe traumatic brain injury. You may need the following types of care:

• Emergency transportation
• Emergency trauma care
• Hospitalization
• Doctor’s visits
• Rehabilitative therapy at a rehab center

The costs can easily rise to be tens or hundreds of thousands of dollars. If no one else was at fault, you may be responsible for paying the majority of your medical bills yourself. The same goes for illnesses, including cancer, which can cost hundreds of thousands of dollars to treat. It only makes matters worse that most people cannot work during their recovery.

Discharging Medical Bills

Fortunately, medical debt is a type of unsecured debt that is dischargeable in bankruptcy. The law handles medical bills in the same way as credit cards and allows bankruptcy courts to wipe out these bills completely in most situations. 

Chapter 7 bankruptcy – Consumers who qualify for Chapter 7 and successfully complete the process can qualify for the discharge of an unlimited amount of medical debt. If you paid medical bills with a credit card, that balance can also be cleared. You may have to forego certain property in exchange for the discharge, but many filers do not have any unexempt property.

Chapter 13 bankruptcy – Chapter 13 bankruptcy involves reorganizing your debts, and your medical bills will be combined with other types of general unsecured debts. Some of your payments under your repayment plan may go to your unsecured debts, but not always. The medical debt that remains can be discharged at the end of your repayment plan. There is a limit to the amount of unsecured debt you can have in a Chapter 13 case, however. 

Medical debt can weigh heavily on a household that is already dealing with a serious illness or injury. Becoming free of that debt through bankruptcy can give you a fresh start and allow you to rebuild your life without that debt burden.

Contact a Bankruptcy Lawyer in Merrillville to Discuss Your Options

Whitten & Whitten knows that people file bankruptcy for many different reasons. We help clients explore all of their debt-relief options, including Chapter 7 or Chapter 13 bankruptcy. Contact us to speak with a Northwest Indiana bankruptcy attorney right away.